Bareboat charter with possession and effective control transferred to the charterer is not taxable supply of tangible goods service.

Bareboat charter arrangements transferring possession and effective control of dredgers, vessels and allied equipment to the charterer were treated as outside taxable supply of tangible goods service because ownership remained with the owner while operational responsibility, insurance, fuel, crew-related obligations and redelivery obligations passed to the charterer. The same characterisation continued after 01.07.2012, so the declared service entry did not alter the tax treatment. The prior final decision in the appellant's own case was treated as conclusively covering the dispute. The service tax demand, interest and penalties were therefore unsustainable, and the impugned order was set aside.

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Issues: Whether the hiring of dredgers, vessels and allied equipment from foreign owners under bareboat charter arrangements amounted to supply of tangible goods service or declared service so as to attract service tax, interest and penalties.

Analysis: The arrangement was examined as a whole and the charter terms showed delivery of the vessel to the charterer, full possession and absolute control during the charter period, responsibility for operation, maintenance, fuel, crew-related obligations, insurance and redelivery after expiry. On that basis, the transfer was held to be one of right to possession and effective control, with ownership remaining unchanged. Such a transaction falls within the exclusion from service tax applicable to supply of tangible goods, and the same legal position continued to apply for the post-01.07.2012 period despite the declared service entry, because the core character of the arrangement did not change. The prior final decision in the appellant's own case was also treated as conclusively covering the dispute between the parties.

Conclusion: The hiring arrangements were not liable to service tax under supply of tangible goods service or as a declared service, and the demand, interest and penalties were unsustainable.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief in law.

Ratio Decidendi: A bareboat charter that transfers possession and effective control of the vessel or dredger to the charterer is outside the scope of taxable supply of tangible goods and does not become taxable merely because the owner retains title or imposes operational restrictions consistent with the charter.

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